Yahoo Finance Major electricity rip off for millions of Aussies exposed by ACCC. Act now to save money
Millions of Aussies should act to save money now.
Millions of Australians struggling with the cost-of-living crisis are paying more for electricity than they need to be and are being urged to “find a cheaper deal” as a protection system has "failed dismally".
The Australian Competition and Consumer Commission (ACCC) assessed the energy deal five million Australians were on and compared them to the cheapest out there on the market.
A staggering 79 per cent were found to be on higher offers than what’s out there, with the ACCC warning that loyalty was costing Australians who are often lured in with cheap plans that end up growing in cost.
"The big secret for years in the energy market has been what people are really paying - we can look at current offers and see what they cost but most people are paying old prices and only energy retailers know what those prices are. This report finally pulls back the veil and what’s behind it is very ugly," money expert Joel Gibson told Yahoo Finance.
Had a wild bill? Contact belinda.grantgeary@yahooinc.com with your story
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Gibson described the findings as a “disgrace”, noting that Australians were not being protected by default offers, which were meant to be the safety net or base level the government regulator sets in July each year and considers a “fair price” for electricity.
"In 2019 the Morrison government rejigged the energy market to protect households from being ripped off but now we have half of Australia paying more than the price cap they created," Gibson said.
"It was meant to be an effective soft price that you pay if you don't shop around for market offers."
“You have a right to pay no more than the default offer. Most people don't know this, which is a travesty.”
He said Australians had been “failed dismally” by the price cap, with 47 people paying either what the government thinks is a price cap or above.
“This suggests a serious problem in our energy market, which means that basically around half of us are paying hundreds of dollars, even $1,000 or more above what we should for electricity in the coming year.”
Almost 70 per cent of Australians think the government is not doing enough to cut energy costs and electricity has remained the highest concern for household, according to Canstar's Consumer Pulse report released this week.
"Electricity costs have reached more than $400 per quarter for the first time since 2019, with Aussies reporting they are paying $34 more on average than respondents were last year," Canstar found.
Interestingly, only 16 per cent had switched providers in the last year.
How can I save on electricity?
One of the best things you can do to take control of your energy bills is compare energy plans at least once a year. You can do so through a government website. Find out which one for your state or territory here.
This will help you avoid paying the loyalty tax that comes from benefit periods (i.e. long-term discounts) will running their course after 12 months before you're likely be moved on to the provider’s standing offer plan.
This is when you will notice your bills start to creep up again because you’re no longer on a competitive deal from your provider.
ACCC Commissioner Anna Brakey agreed.
“Electricity retailers offer cheaper plans to attract new customers but over time we observe these plans becoming relatively more expensive, so many loyal customers will be paying more than they need to be,” Brakey said.
“Prices for new customers tend to be competitive, but we are concerned that the market is not delivering for customers who do not regularly switch or engage with their existing retailer.”
From September 30, power companies have to tell customers on their bills if they have a cheaper plan available and how much they could save by switching.
This will be known as the retailers ‘better offer’ statement and will be displayed on the front page of customers' power bills. It will be displayed on every bill for customers charged quarterly, and every third bill for those on a monthly cycle.
Retailers will also need to include details on how to switch plans, under the new obligations in the Australian Energy Regulator’s (AER) Better Bills Guideline.
Why can’t retailers automatically put customers on their best offer?
Simply put, it’s how retailers make money.
“It's called the front book/back book pricing methodology … You see it in energy, insurance, banking and it means old loyal customers pay more to subsidise the cheap deals to attract new customers,” Gibson told Yahoo Finance.
“So it's always been a bit of a mystery whether you're getting the best deal - they have 'retention offers' that they only offer you when you're leaving.
“They also have under the table deals they offer to friends and family, or to motoring clubs or rewards programs or money-saving clubs.”
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